Lawmakers oppose Bush’s pay-for-performance fund

Lawmakers from both parties said Tuesday they would oppose a Bush administration proposal to create a $500 million fund for performance-based pay raises for federal employees this year.

Democrats and Republicans from both the House and the Senate raised concerns about the pay-for-performance fund at a hearing on the federal workforce. The lawmakers said agencies need to have better performance evaluation systems in place before they tie federal pay raises more closely to evaluations. Some also said that federal base pay needs to be higher.

"There's a little skepticism about going forward with pay for performance," said Sen. George Voinovich, R-Ohio, chairman of the Senate Governmental Affairs Subcommittee on Oversight of Government Management, Restructuring and the District of Columbia. Unless changes are made to the administration's proposal, "this is not going to write this year," he said. "We don't think it's there."

Congress would have to approve creation of the pay-for-performance fund, but the opposition from key Republicans as well as Democrats signaled that the proposal is in trouble. Rep. Jo Ann Davis, R-Va., chairwoman of the House Government Reform Subcommittee on the Civil Service, Census and Agency Organization, agreed that the administration should wait until agencies' performance evaluation systems are in order. "I almost feel like we're putting the cart before the horse," Davis said.

A Bush administration representative told Voinovich and Davis that setting up the fund would encourage agencies to redesign their performance evaluation systems. Office of Personnel Management Deputy Director Dan Blair also said that too much of the annual budget for federal pay raises goes to automatic, across-the-board pay increases, rather than to raises based on individual performance.

"The status quo is unacceptable," Blair said. "You need to put the carrot before the horse to get the horse to move."

The Bush administration proposed the $500 million pay-for-performance fund as part of the fiscal 2004 budget. Under the proposal, federal employees would get a 2 percent across-the-board pay increase next year, as well as any scheduled tenure-based increases, which average about 3 percent. Agencies would draw money from the pay-for-performance fund to give their best employees additional raises based on positive performance evaluations.

But lawmakers and union leaders have advocated a 4.1 percent average across-the-board pay raise next year, the same across-the-board raise that the Bush administration has proposed for military personnel.

Lawmakers also agreed with Comptroller General David Walker, who said he supports pay-for-performance in concept but doesn't think it would work until federal agencies create "modern, effective, credible and validated" performance management systems. "Congress should consider providing specific statutory standards that agencies' performance management systems would be required to meet before OPM could approve any such pay for performance effort," Walker said.

In survey after survey, federal employees have said that their managers don't deal effectively with poor performers. Without strong performance evaluation systems, agencies that try to tie pay to performance could find strong resistance from employees who don't trust that the evaluations accurately reflect their performance, Walker and lawmakers said.

Davis directed that concern at OPM's Blair. "If you give that horse the carrot but you don't put the cart up properly, you have a problem," she said.

Walker suggested the government test pay-for-performance on the 7,000 members of the Senior Executive Service, the governmentwide top cadre of career civil servants, before applying it to rank-and-file workers and their direct supervisors.

Congress is considering legislation (the Senior Executive Service Reform Act, S. 768 and H.R. 1602), that would increase the cap on federal executive pay and give more annual leave to SESers with few years of service. Walker said the legislation should set standards for SES performance evaluation systems.

Last year, Congress passed a provision in the 2002 Homeland Security Act that allowed agencies to pay large bonuses to executives in a single year, rather than spread out the bonuses. But to take advantage of that provision, agencies must get their executive performance evaluation systems approved by the Office of Management and Budget and the Office of Personnel Management. The two agencies must certify that executive performance rating systems make "meaningful distinctions based on relative performance," according to the legislation.

Carol Bonosaro, president of the Senior Executives Association, urged lawmakers to take OMB out of that process. She also said safeguards against politicization of the SES must be included in law, agencies should not be forced to rate executives on a curve, and executives should be able to appeal poor performance appraisals.